The SRAS Curve
- Aggregate supply is the total supply of goods/services produced within an economy at a specific price level at a given time
- The short run is a period in which wages and other factor prices are inflexible
- The long run is a period in which there is full wage and factor price flexibility
A diagram showing the upward sloping short run aggregate supply (SRAS) curve for an economy
- The AS curve is upward sloping due to two reasons
- The aggregate supply is the combined supply of all individual supply curves in an economy which are also upward sloping
- As real output increases, firms have to spend more to increase production e.g. wage bills will increase
- Increased costs result in higher average prices